Ballmer moves out front to show Microsoft's getting cloudy

Just a week after showing server- and cloud-business boss Bob Muglia the door, Microsoft CEO Steve Ballmer personally took the stage to introduce the next, heavily cloud-ified version of the company's Dynamics CRM product.

Microsoft has been criticized, sometimes fairly, sometimes not, of being slow to adopt cloud computing and weak in its commitment to it. Muglia, who said he was leaving Microsoft after Ballmer told him it was time for new blood at the head of the servers-and-tools division, was the chief articulator of the company's cloud strategy, which InfoWorld's Eric Knorr called "surprisingly clear" in September.

Since it first announced plans to sell software in both on-premise and cloud versions, Microsoft's biggest problem has been political rather than technical.

It has had enormous problems navigating the inevitable channel conflict between the VARs and resellers on which Microsoft's empire is built and Microsoft's ability to sell applications as SAAS or cloud services directly and cutting out the middleman.

Less politically troublesome but more of an issue, ultimately, for stockholders and Ballmer's own longevity as CEO is the need to make Microsoft's licensing flexible enough to be attractive in virtual or cloud environments without impacting the quarterly financials.

Microsoft customers using virtual servers complain that licenses tied strictly to a single machine keep them from moving a virtual server from Server A to Server B without buying the same VM a different license for each machine.

Cloud platforms -- which let customers change the number of cores or processors on which a VM can run as well as the amount of memory or storage available -- are even worse for operating systems licensed according to the power of the physical machine on which the run and tied to specific processors.

Ballmer's dilemma:

Shifting both revenue and distribution models simultaneously is tough for any company and for the CEO on whom any failures can fall much more clearly than during times when the management challenge is less clear.

Ballmer, traditionally the sales-and-revenue business guy to Bill Gates' software visionary, appears to have had more trouble getting himself and Microsoft out of a rut that made it the most powerful IT company in the world to adapt to a new distribution model it couldn't avoid.

Ballmer has been showing the pressure in the outflow of top executives, and in the noticeably harsher-than-it-should-be tone in the announcement of Muglia's departure.

“When I see something like that, I think the person who is doing the firing is under a lot of pressure,” said Gren Millard, a senior partner with the executive recruiting firm Korn Ferry International in Washington D.C. told MarketWatch. “It looks reactive.”

For Microsoft, having a weak, expensive or unattractive competitor to Salesforce.com -- the poster-child for the successful, enterprise-quality, dynamic business-software company for the cloud-computing world -- would make Microsoft look even more stodgy and unappealing to customers wanting to pick and choose software services online.

By stepping out in person to introduce the cloudified version of Dynamics CRM, immediately after showing Muglia the door, Ballmer makes clear to both investors and customers that he's hands-on with new cloud products and can step out to represent and evangelize for them in the way Gates did the company's most important technology.

The new version of Dynamics CRM ONline is a direct attack on Oracle's CRM on Demand as well as Salesforce, including a host of new features that bring it close to par with Salesforce and introductory pricing far below that of both competitors.

The new version, which includes connections to Azure, an Outlook client, and integration with online versions of Microsoft Office Communicator, Live Messenger and SharePoint, is more broad-based in its abilities and simple in interface compared to earlier versions, analysts said.

It's also available as a traditional on-premises application, but it's the cloud version, technical and implementation support from the channel and number of effective add-ons from ISVs that will show how well the programming, licensing, channel relationships and software ecosystem line up to make Dynamics CRM attractive.

It will also server as an early indicator of how effectively Ballmer has made the jump to making business decisions based on cloud-based and virtual infrastructures, rather than the security blanket of revenue, partnerships and inertia that would make the cloud era more comfortable for Ballmer and Microsoft, but at the cost of shifting it out of the main channel and into a sideline where it would slide gradually down into irrelevance.

Given his inelegant stage presence and lower celebrity quotient than Gates, the audience at the Dynamics CRM announcement might have wished the wonder-boy was still the one to make the big product introductions.

Anyone with investments in Microsoft or relying on it to keep their software on track and up to date, had to be happy to see Ballmer up there slinging and selling and putting someone -- anyone -- upfront as the focus for expectations by both Microsoft and its customers.

Kevin Fogarty writes about enterprise IT for ITworld. Follow him on Twitter @KevinFogarty.

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